6/25/2010 @ 3:44PM

America's Recovery Capitals

The Lone Star state’s major metro areas–Austin, Dallas/Ft. Worth, Houston and San Antonio–are all emerging from the recession better than their counterparts in many areas of the country. Austin is a government and tech center. Dallas and Ft. Worth get a boost from major corporate operations located there. Houston is a hub for the profitable oil industry and the U.S. military gives San Antonio a lift.

“The places that are likely to recover the fastest seem to be places that have suffered the least during the recession, says Howard Wial, who heads up research on metro and regional economies at the Brookings Institution’s Metropolitan Policy Program. Texas, he notes, has a fiscally stable government buttressed by oil and gas revenues and spending from Uncle Sam.

Each quarter Brookings publishes its “MetroMonitor, which tracks how the 100 largest metro areas in the country are emerging from the Great Recession, based on historical data. (Other Texas towns performing well include McAllen and El Paso.)

But we wanted to see how major metro areas are likely to fare within the next few years. We asked Moody’s Economy.com to provide us with analysis and annual growth prospects for employment and economic output for the period 2010-14. We examined the 25 largest metro areas in each of the four regions of the country–the South, the Midwest, the West and the Northeast to arrive at our national champs. Those that made our list had the best combination of job and ouput growth, equally weighted.

One of them is Des Moines, Iowa. It has a relatively low cost of living, an educated workforce (the University of Iowa is two hours away), and it’s a Midwest financial and insurance center, home to many banks’ refinancing operations. The metro area’s median housing price actually peaked in 2008 at $152,400 and has only dropped about 4% since then, according to Moody’s Economy.com.

Another area with strong growth projections is the Raleigh-Cary, N.C., metro, a research hub for the tech and biotech industries. It also has a highly educated workforce (several major universities are nearby) and its housing market appears to be on the upswing. Employment there is projected to grow at an annual rate of 2.9% during the next four years, and GMP is expected to grow at 4.3% annually by 2014.

Mark Zandi, chief economist and cofounder of Moody’s Economy.com, says he expects manufacturing and distribution centers (think Atlanta and Dallas) to show the first signs of life as the recovery unfolds this year. Later in the year there is likely to be more job creation in professional services like accounting and management consulting centers such as New York, Chicago and San Francisco. Expect financial services and lending to pick up by next year, he says, giving a lift to metro areas like Charlotte and Boston.

Some metro areas will obviously take far longer to recover than others, but several recession-battered towns now could stage a comeback by 2014, according to Economy.com. That includes Las Vegas, where unemployment is 14.2% and the median housing price has dropped about 60% since its peak in 2006. Like Palm Coast, Fla., the economic situation in Las Vegas can only improve, but Moody’s Economy.com projects employment and GMP to grow at a relatively healthy annual clip–2.9% and 4.3%, respectively–during the next four years. Still, Sin City’s economy will not take off until the overall U.S. recovery is fully underway, according to the analysis.

Zandi says he expects tourism and the leisure and hospitality issues to start recovering by 2012, but metro areas that have been battered by the bust, such as Las Vegas and Orlando, Fla., also have another lure–housing prices are low, office rents are down and there’s plenty of real estate on the market. “They’re bargains, and at some point people are going to take notice.”

Nonetheless, the housing market continues to be a troubling factor in many areas of the country (Florida, for example), and the expiration of the first-time homebuyers’ tax credit–which boosted home sales earlier this year–could cause a further temporary slowdown in housing, says Brookings’ Wial. For the Gulf Coast, it’s not yet fully known just how much the oil spill will damage metro areas in those states. A slowdown global trade, a worsening of the European debt crisis, and a sharp rise in U.S. interest rates due to fiscal problems would also dampen recovery.

As in Texas, metro areas that have good growth prospects through the recovery tend to be hubs for government activity, energy, logistics and, in some cases, technology growth. That explains why Austin, home to
Dell
Computer, the University of Texas and the Lone Star state’s government has an annual GMP growth prospect of more than 6%. Atlanta, home to
UPS
and also a government seat, is expected to see an annual employment growth rate of 3.1% and an annual output rate of 5.1% between 2010 and 2014. Albuquerque, a hot spot for the solar manufacturing industry and home to the Sandia National Laboratories, managed by
Lockheed Martin
, could see annual economic growth of nearly 4% during the same period.

Job growth in the Northeast is likely to be more depressed over the next few years than in other regions of the country. That’s likely due to demographic and geographic reasons (there’s limited space for physical growth). But that’s not to say the region isn’t also ripe for recovery. With so much government activity since the economy crashed in 2008, Washington, D.C., is expected to prosper. And according to the Brookings Institution, Albany, N.Y., Augusta, Ga., and Buffalo, N.Y., have posted strong recoveries so far.